Iowa Electronic Markets open new political markets for 2000 presidential race

The Iowa Electronic Markets have launched two new political futures markets in which traders can buy and sell shares in prospects of candidates in the 2000 presidential race.

Professors at the Henry B. Tippie College of Business at the University of Iowa have opened web-based trading in two new markets at http:/tippie.uiowa.edu/iem/. The 2000 Presidential Election Vote Share Market is based on the popular vote cast for the Democratic, Reform and Republican party candidates in the 2000 U.S. Presidential election. The 2000 Reform Party National Convention Market is based on the outcome of the Reform Party presidential nomination process.

In the vote share market, payoffs on a candidate's contract will be $1 times the share of the popular vote that the candidate receives. For instance, contracts for a nominee who receives 32.4 percent of the three-party vote, will pay 32.4 cents each. Thus, prices should predict the vote shares candidates will receive.

As of Jan. 18, after more than a week of trading, IEM traders give the "Republican nominee" an edge in the November 2000 elections, with that contract trading at 51 cents, compared to the "Democratic nominee" contract trading at 45 cents and the Reform Party nominee at 5 cents.

The Reform Party market is set on a winner-take-all basis where the winning contract will pay $1, while the others will expire worthless. Thus, prices predict each candidate's chances of winning the nomination. As of Jan.18, Pat Buchanan shares traded at 58 cents, followed by Donald Trump at 13 cents and Ross Perot at 13 cents, Jesse Ventura at 6 cents, and a rest-of-field contract at 10 cents.

The IEM is a small-scale, real-money market used as a teaching and research laboratory. For an investment of as little as $5 or as much as $500, trading in the markets is open to participants world-wide.

Since its beginning with the 1988 U.S. Presidential election, the IEM has established a reputation for forecasting election results with great accuracy. The IEM has predicted election vote share within 1 percent for each of the last three U.S. presidential elections.

The IEM also conducts markets in the Democratic and Republican presidential nominations, the New York Senate race, and Republican or Democratic control of the two houses of Congress. The IEM has attracted almost 4,000 trader accounts worldwide with a total equity of about $86,000; more traders are expected to log on as the election season continues.

For more information, see the Iowa Electronic Market website at http:/tippie.uiowa.edu/iem/ or contact the IEM office at (319) 335-0881.